Piercing State Tax Cap Could Mean No Tax Rebate For District Homeowners

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School districts looking to pierce the state-mandated cap on tax levy increases may face an additional hurdle with Governor Andrew Cuomo’s tax-freeze proposal, which will take effect this year.

In March, Gov. Cuomo announced a two-year “tax freeze” plan that would give homeowners across the state a property tax rebate, but only if their school district or local municipality stayed beneath the 1.46-percent tax levy cap during the first year. The checks will cover the difference between last year’s and this year’s property taxes, “freezing” the rate for the taxpayer.

If a district does pierce its tax cap, property owners will not receive a rebate check. The district would also need 60 percent of votes cast for a budget that pierces the cap to pass, as opposed to a simple majority if it were beneath the cap.

For districts like East Hampton, which announced in March that it will try to pierce the cap, and possibly East Quogue and Bridgehampton, which have been contemplating it, the “freeze” legislation could pose a problem in gaining voter support.

The rebate comes from $1.5 billion appropriated in the agreed-upon budget, which will be distributed over the course of three years, according to State Assemblyman Fred W. Thiele Jr. This year, $344 million will be designated to rebates; $810 million will be designated next year; and $347 million will be designated the third year, he said.

In essence, the governor—who pushed for the cap as part of an effort to cut property taxes at the local level—is ratcheting up the pressure on school boards to keep spending down. This year, for the first time, taxpayers have a rebate check as incentive to vote against any effort to pierce the cap.

“They’re basically asking the voters to go against the freeze,” Mr. Thiele said of the districts that try to pierce the cap. He explained that because the rebate covers the increase in the tax levy, districts piercing the cap are essentially asking voters to choose between what amounts to a zero-percent tax increase, once the rebate check has been factored in for a budget that conforms to this year’s 1.46-percent cap, or whatever the tax increase would be once the cap has been pierced.

“The governor is basically upping the ante for school districts,” he said.

This year, East Hampton’s 2014-15 budget represents a 2.43-percent increase in the tax levy, according a press release issued by the school in late March. If the budget passes, property owners will not receive a rebate check.

In order to qualify for the rebate, said the district’s business administrator, Isabel Madison, a person must prove they are a primary resident of the town, and must make $500,000 or less annually. “The rebate checks depend on people’s home assessments,” she said. “The higher the assessment, the bigger the check.”

According to Ms. Madison, for households assessed at roughly $4,000, residents would see an estimated $18.41 rebate check. For a household assessed at $6,000, rebate checks would be roughly $27.46; and for a household assessed at $8,000, homeowners could expect a check for roughly $36.61.

Ms. Madison said if the district were to stay under the cap, it could add only $255,000 in spending to its 2013-14 budget of $64.2 million.

If the budget does not pass, the board would have another opportunity to present the same budget to voters again, or a revised budget that would further cut spending, getting closer to or under the 1.46-percent cap, Mr. Thiele had said in a previous interview. If a revised budget under the cap were to be approved, homeowners would still get their rebates.

Bridgehampton School District officials also say they plan to adopt a budget this week that will seek to pierce the cap.

The second year of the tax freeze legislation tasks districts with not only staying under the cap to provide rebates to homeowners, but also providing a capital plan that somehow demonstrates the use of shared services or administrative consolidation. “You don’t have to implement the plan,” Mr. Thiele said, “but you just have to submit it.”

According to East Hampton Superintendent Richard Burns, the district is moving toward sharing services with districts both in and outside of East Hampton.

Mr. Burns said East Hampton is talking about sharing AP classes with other districts, depending on enrollment, to help ensure programs are not cut because there are not enough kids in a particular district to run the class.

“We’re looking to use technology to allow that to happen,” said Mr. Burns, who explained the high school hopes to use Jigsaw Meeting, an interactive technology that allows students to take classes via web seminar, thus integrating other districts and increasing enrollment.

East Hampton is also working with neighboring districts for possible shared services in transportation, Mr. Burns said, explaining that by working with districts like Springs, there may be some room to streamline the number of school buses traveling along similar or the same routes.

“Certainly the cap forces one to think this way,” said Mr. Burns of sharing services, “but I think we’ve been successful so far. Everyone’s been really on board and very willing to cooperate.”

The East Hampton School Board will give its final budget presentation before adoption on April 22. The public vote will be held May 20.

Kyle Campbell contributed to this story.

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